Peer Effects on Investment Decisions: Do Industry Leaders and Young Firms Behave Differently?

Abstract

This study examines the influence of peer firms on a firm’s investment policy in Pakistan during the period 2001–2017. It also investigates the heterogeneity in peer effects by taking into account a firm’s age and its leadership role in the industry. The system-GMM estimation results suggest that peer firms significantly influence a firm’s investments on both tangible and intangible assets. Yet, peer effects are more pronounced for tangible investment. We also observe that young firms are more prone to imitate the investment decisions of their industry peers. However, the findings indicate that mimicking is not a tactical behaviour for industry leader firms. These findings have important implications for both the firm management and the owner community.

Does Peer Matters? How Peer Influence Firm Payout Policies: Evidence from Pakistan

“…The finance literature has found a significant and positive influence of firm size on dividend payouts (Gul et al, 2020) and suggests that larger companies are more likely to pay dividend payouts (Franc-Dabrowska and Madra, 2020). However, the literature has found that new companies are more likely to mimic their industry peers' decisions (Rashid and Said, 2021). Consistent with Lieberman and Asaba (2006), this study examines which of these theories is supported by the Pakistan Stock Exchange (PSX) firms.…”

“…The estimated coefficient of the peer dividend payout ratio is significantly positive in both big (β=0.0098, P>1%) and small (0.1723, P>5%) firms but the magnitude of this impact appears to be greater among small companies. The results indicate that the effect of peers on firm payouts is greater among smaller firms, implying that mimicking the dividend payout decision was significant primarily for younger and smaller firms (Rashid and Said, 2021). However it is not surprising that most dividend payers are big firms because the big firms appear to be more pressured to mimic major positive adjustments in dividends (Adhikari, 2013).…”

Empirical Analysis of the Impact of Top Management Team Social Networks on the Homophily Effect of ESG Disclosure in Companies

“…Strong group effects will lead to excessive debt and overinvestment by companies, thereby weakening their debt repayment, profitability, and other issues. Starting from the causes of group effects, the authors analyze the issue of excessive corporate debt and provide strategies and recommendations [21]. Scholars have extended the study of group effects to government policy formulation, which goes beyond the corporate level.…”